Thank you all very much. And thank you General Mattis, not only for your kind words, but for your 35 years of service to America.

It’s an honor to be with you. And JFCOM, AFCEA, NDIA, USNI—I commend you for this conference. Because in this room today we have the essence of America’s military strength—every component of a truly Joint Force and our partners.

We have our armed forces: Gen. Mattis and Vice Admiral Harward; service components; and some of the 1.2 million dedicated men and women of Joint Forces Command—Soldiers, Sailors, Airmen and Marines; Active, Guard and Reserve. And we thank and salute every single one of you.

We have our friends and allies: representatives from our NATO allies—partners ready for today’s missions, from the Balkans to the shipping lanes off the Horn of Africa, from Iraq to Afghanistan. And we’re partners in preparing for tomorrow.

We have our civilian partners from across government because today’s security challenges cannot be met with military power alone; we need the “whole of government”—diplomacy and development and assistance as well. And we have our partners in industry. You are an indispensable part of our Joint Force, because a strong military depends on a strong defense industrial base.

And for many of you working in the defense industry, this is the latest chapter in your commitment to our nation. So many of you are veterans. And to all the veterans here today, we thank you for your service.

And I’m here today because we need all of you—all services, all partners, in government, in industry, around the world—to serve together, to work together, to think through the challenges we face together so we can keep our military strong and keep the American people and our allies and friends secure.

I come to you on behalf of another kind of “joint team.” In President Obama, we have a Commander in Chief who during the first wartime transition in decades was willing to reach across the aisle and pick the defense secretary of his predecessor. In Secretary Gates, we have a leader who has now served with distinction under eight presidents of both parties.

Washington, DC is an “area of responsibility” all its own. Important policy debates can often devolve into pitched political battles, Washington’s own version of “irregular warfare.” Bipartisanship in national security can sometime be elusive. But ladies and gentlemen, you can be proud that your defense leaders, at the White House and at the Pentagon, are bringing a real commitment to bipartisanship every day. And our nation is stronger for it. And America’s Armed Forces are stronger for it.

Indeed, at a time like this, budget season, it’s all too easy to get distracted by endless debates about this budget cut or that, this program or that. So it’s important to not lose sight of the bigger picture.

The United States of America has the best-trained, the best equipped, the best-led military force the world has ever seen. And we need to keep it that way. That’s why the President’s first budget, announced last week, increases the defense base budget by four percent to $534 billion.

We need to uphold our solemn commitment to take care of our all-volunteer force and to ensure they can prevail in the wars we’re in. So we’re halting reductions in the Air Force and Navy. We’ve increased the end strength of the Army and Marine Corps and we’ve done so two years ahead of schedule. And across the entire defense budget, the largest single increase in spending—up nine percent; $13 billion—is for our military personnel.

This means new pay raises, military and civilian. It means new barracks, family housing and child care centers. It means full funding for military health care. And it means more than $3 billion to care for those who have sacrificed so much, America’s wounded warriors.

And, as always, but especially in these hard economic times, we need to be fiscally responsible. And so we’ve ended the practice of ad-hoc funding of the wars in Iraq and Afghanistan, through supplementals. We put the costs of these operations where they belong—in the regular annual budget. We will plan responsibly. And as the President has said, we will communicate the costs of these conflicts candidly to the American people.

There’s another benefit to this bipartisan approach. It’s allowing us to pursue a new direction in defense.

In most administrations, the first budget is developed at a time when many of the new civilian defense leaders aren’t even in place or still new to the job. They get criticized for the decisions they don’t make. When I arrived at the Pentagon with the Clinton Administration in 1993, Secretary Aspin called our first budget a “treading water” budget. And he was right.

This year, with this budget, we have just the opposite. President Obama has made it clear that it’s time to break out of the “conventional thinking that has failed to keep pace with unconventional threats.” And Secretary Gates has been moved to action by his two-plus years of experience guiding a department that he realized was not fully on a war footing.

So in this first budget, rather than simply “treading water,” we’re making waves. We’re making hard decisions. We’re making bold changes. And we’re proposing far-reaching reforms. I know that every administration likes to say that its budgets represent “reform.” But I have been in the defense arena—in think tanks, in Congress, in the Department, in industry—for nearly 30 years and this budget is one of the most dramatic set of reforms I have seen, from the forces and systems we field to how we develop them.

For example, missile defense. The threat to our forces from theater missiles is growing. The threat to our allies from ballistic missile attack from rogue nations is growing. Yet we continued to spend billions of dollars on programs facing major technical challenges and questionable operational roles. So we made a decision.

We’re restructuring the entire missile defense program to focus on the threat from theater missiles and rogue states. We decided not to invest in the second Airborne Laser Prototype Aircraft, and we’re terminating the Multiple Kill Vehicle program. At the same time, we’re accelerating our most capable theater missile defense systems—the THAAD and the sea-based SM-3 program. And we propose converting six additional Aegis ships to provide ballistic missile defense capabilities.

In fact, across a whole range of programs, we made a decision to halt or delay production of systems that relied on promising, but unproven, technology, while continuing to produce—and, if necessary, upgrade—systems that are best in class and that we know work. That’s why we cancelled the program to build the new presidential helicopter, the cost for which had more than doubled—to more than $13 billion. And that’s why we canceled the $19 billion Transformational Satellite program (TSAT) and will instead buy two proven and more affordable satellites to partly fill the gap.

There was a second major consideration behind the sweeping changes we’ve proposed, indeed, the very question you’ve confronted at this conference: how can we better train and equip our warfighters for the wars of today and tomorrow?

JFCOM’s Joint Operating Environment document laid out our challenge: the need to confront the full spectrum of warfare, from the conventional to the irregular to hybrid forms that blend both: the nation states and near-peer competitors who will use irregular or asymmetric tactics; the non-state actors and terrorist groups who seek weapons of mass destruction. How do we respond? The Chairman’s Capstone Concept for Joint Operations laid out the answer: a truly joint force capable of confronting the full spectrum of threats.

If those two documents were the words, then this budget has the deeds to back them up. We’ve reaffirmed our commitment to a Joint Force—not only in the way we fight, but the way we buy.

Faced with the choice between a service-centric or niche-mission system on the one hand, and a multi-service, multi-mission solution on the other, we chose the latter. For example, to enhance our fifth-generation fighter capability, we’ll complete production of the F-22 fighter at 187 aircraft and increase our buy of Joint Strike Fighters. To maintain our combat search and rescue capabilities, we’ve cancelled the Air Force Combat Search and Rescue helicopter—a troubled, single-service, single-purpose aircraft. Instead, we’ll pursue a more sustainable, multi-service approach. To improve our ability to move troops and equipment within theater, we’ll charter more Joint High Speed Vessels.

Even as we strengthen the Joint Force, we’re doing something else. We’re giving our warfighters an “institutional home:” inclusion in the base budget and the steady, long-term funding that they deserve and need. We’ve added nearly $2 billion to the base budget for intelligence, surveillance and reconnaissance (ISR), including the unmanned aerial vehicles so critical in Iraq and Afghanistan. We’re increasing our Special Operations forces, with more personnel and more equipment. We’re increasing our buy of Littoral Combat Ships.

And we’re reshaping the Army’s Future Combat System. We are immediately pushing out, throughout the Army, the new technologies and unmanned vehicles needed on the battlefield today. At the same time, we’re halting the ground vehicle program and we’ll ensure that future vehicles reflect the lessons of Iraq and Afghanistan.

Together, these changes send an unmistakable message to our armed forces and to our adversaries: from now on, irregular warfare is a regular part of America’s military planning.

Our reform agenda includes a third component: ensuring that we have an acquisition system that is as flexible and effective as the forces it supports. A modern, effective acquisition system should deliver savings and speed: savings to taxpayers; speed for warfighters—the tools and technologies they need when they need them. But as we all know, today’s acquisition system too often does neither.

As a result, stakeholders on all sides have simply lost confidence. I’ve seen this myself. When I was a staffer in Congress, I thought, “Those folks in DOD don’t know what they’re doing!” When I moved over to DOD, I thought, “Those folks in Congress don’t know what they’re doing!” And when I got to industry, I thought, “Neither of them know what they’re doing! And now that I’m back in government, I don’t know who to blame.

Today, many in Congress, indeed, the American people, have lost faith in the Department’s ability to manage and industry’s ability to deliver. Many in industry have lost faith in the Department—an understaffed, risk-averse acquisition workforce—and its ability to set clear requirements and stick to them over time. So we’ve launched five initiatives, major initiatives, to bring about fundamental reform:

First we’re dramatically increasing our acquisition workforce—hiring 9,000 new employees and converting 11,000 contractors to federal employee, for a total increase of 20,000 positions. This will increase our expertise in cost estimating, systems engineering and program management.

Third, we’re going to improve cost estimating and reduce the risk of cost overruns by relying more on independent cost estimates.

Fourth, we’re going to strengthen the execution phase by a greater use of Fixed-Price development, where appropriate, and more Configuration Steering Boards to reduce “requirements creep.”

Finally, we’re going to do everything in our power to cancel poorly performing systems whenever they run off the rails. And, as I’ve described, in this budget we’ve made an important start at this tougher approach to failure.

Now, we’re under no illusion that this will be easy. Over the decades, countless commissions and studies, more than 130, have called for reform. It’s one of those things in life that never seems to go away: death, taxes and acquisition reform. So many people have asked me: why do you think you’ll succeed where so many others have not?

My answer is that we may finally have a “perfect storm” for real reform. We have a President who is firmly—and very publicly—behind our efforts. In fact, I can’t remember the last time a President has stood at the White House and uttered the words “procurement reform.”

We have a Congress determined to act: the Senate, led by Senators Levin and McCain, already passing a major reform package; the House, soon to follow with legislation on its way soon to the President, possibly by Memorial Day.

And we have a Department, me being here today to say: we are determined to do better, to avoid the mistakes of the past, and to work harder and closer with our industry partners, many of whom have told me that they too are ready to work together.

And so while mindful of the challenges, I’m more optimistic than I have ever been that we will achieve real acquisition reform and we will deliver saving and speed: savings to taxpayers and speed in delivering new technologies to our warfighters.

Finally, this spirit of reform is guiding the Department as we seek to answer the question captured in the title of this conference: how best to meet the demands of the future security environment? It’s the same question that’s at the center of three major reviews now underway: the Quadrennial Defense Review—the QDR, the Nuclear Posture Review, and the President’s review of cyber-security policy. And each of these strategic reviews is an opportunity for strategic reform.

In the Quadrennial Defense Review we are developing a plan to better align our force structure with our new strategic realities, especially irregular warfare. In fact, by seizing this moment and using our first budget to begin pursing major reforms, we helped set the stage for the QDR.

Let me be clear: this does not mean underfunding conventional military capabilities. Indeed, conventional and strategic modernization programs still take up most of the procurement and R&D budget. And roughly speaking, our budget is about 10 percent for irregular warfare, about 50 percent for traditional, strategic and conventional conflict, and about 40 percent for capabilities that span the spectrum.

We also recognize that strategic realities aren’t the only factors that influence our force structure.
Secretary Gates has told the story of Henry Knox, the first Secretary of War. He was tasked with building the first American fleet. But to get support from the Congress, Knox ended up with six frigates being built in six different shipyards in six different states.

But the future security environment we face—conventional, irregular and hybrid threats—will force us to ask fundamental questions about force structure. What is the “portfolio of capabilities” we’ll need? How much amphibious capability will we need? What is the right mix of manned and unmanned aircraft—and how many? And so many other questions. And I should add that we moved up the QDR so that these questions can be answered and addressed sooner, in the very next budget, for Fiscal Year 2011.

Fundamental questions will also be asked in the Nuclear Posture Review. As the President said in Prague last month, the U.S. seeks the ultimate goal of “a world without nuclear weapons.”
But he also made clear that so long as those weapons exist, we will maintain a safe, secure and effective nuclear arsenal to deter any adversary and defend our allies.

That is why we will begin the replacement program for the Ohio class ballistic missile submarine program in conjunction with our British allies. And that is why, going forward, the NPR will ask key questions. What is the role of nuclear forces in our national security strategy? How will this be impacted by negotiations with Russia on a post-START agreement? What is the future of the triad and global strike—both conventional and nuclear?

And perhaps no other security challenge has raised more questions and defied easy answers than cybersecurity. America’s digital networks—military, business and civilian—are targets for a growing number of foreign governments, non-state actors, and criminal elements. At the DOD, our defenses are probed every day. That is why our budget strengthens the Defense Department’s cyber defenses, including more than tripling the number of cyber experts we train every year.

Our national vulnerability is also why the President ordered a 60-day review of national cyber policy. He charged me and other deputies of the National Security Council with two main tasks:
making recommendations on how best to reorganize the executive branch to handle cyber issues, and developing an action plan for strengthening the nation’s cyber security. I can report to you today that our review is complete and it will be released by the President in the coming days.

Even still, our review is by no means the end. On the contrary, our nation has only begun to confront critical questions. What is the proper role for government when most IT infrastructure is in private hands? How should the government be organized and how can concerns about civil liberties and privacy be allayed when so much federal expertise lies in the National Security Agency? How do we deter cyber attacks, and respond to them, when it’s often impossible to trace and identify the perpetrators?

These are the kinds of questions we in the Department need your help in answering. These are some of the great challenges we face. And as we do, as we undertake these reforms and reviews, I’d simply remind ourselves that we never forget the reason we’re here.

We’re here to support all those dedicated men and women serving in harm’s way—the Soldiers, Sailors, Airmen and Marines, Active, Guard and Reserve. They come together, every day, in every corner of the world, to form one, Joint Force. They put aside any narrow, parochial interests. They serve and work together, in the national interest. And they ask nothing more of us.

And if we do, if we give these men and women the support they deserve, then I am confident we will continue to field what the American people have come to expect of us: the best-trained, the best equipped, the best-led military force the world has ever seen.